Widespread adoption of higher salaries for associate lawyers this summer will continue to put financial pressure on law firms next year because many firms haven’t boosted their revenue enough to cover the cost of the raises, according to a report by Hildebrandt Consulting and Citi Private Bank.
The New York firm Cravath, Swaine & Moore announced in June it would increase the pay of first-year associates to $180,000 a year, a $20,000 a year boost. Other firms, including many in Houston, quickly matched the new salary as they try to compete with firms in New York, Chicago and other major cities for top talent from top law schools.
The increase in compensation for lawyers fresh out of law school increased overall average expenses 3.4 percent during the first nine months of 2016, according to the study. During that same period, firm revenues increased 3.7 percent.
Continued slow growth will spur more consolidation among law firms, both domestically and across international borders, according to the study.